EuroDry - Earnings Call - Q4 2024

Transcript

Operator (participant)

Thank you for standing by, ladies and gentlemen. Welcome to the EuroDry Ltd Conference Call on the Fourth Quarter 2024 Financial Results. We have with us today Mr. Aristides Pittas, Chairman and Chief Executive Officer, and Mr. Tasos Aslidis, Chief Financial Officer of the company. At this time, all participants are in listen-only mode. There'll be a presentation followed by a question and answer session, at which time, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. I must advise you that this conference call is being recorded today. Please be reminded that the company announces results with a press release that has been publicly distributed. Before passing the floor to Mr. Pittas, I'd like to remind everyone that in today's presentation and conference call, EuroDry will be making forward-looking statements.

These statements are within the meaning of the federal securities laws. Matters discussed may be forward-looking statements which are based on current management expectations that involve risks and uncertainties that may result in such expectations not being realized. I kindly draw your attention to slide number two of the webcast presentation, which has the full forward-looking statement and the same statement which is also included in the press release. Please take a moment to go through the whole statement and read it. I would like to pass the floor over to Mr. Pittas. Please go ahead, sir.

Aristides Pittas (Chairman and CEO)

Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call. Together with me is Mr. Tasos Aslidis, our Chief Financial Officer. The purpose of today's call is to discuss our financial results for the three and 12 months period ended December 31st, 2024. Please turn to slide three of the presentation. Our financial highlights are shown here. For the fourth quarter of 2024, we reported total net revenues of $14.5 million and a net loss attributable to controlling shareholders of $3.3 million, or $1.20 loss per basic and diluted share. Adjusted net loss attributable to controlling shareholders for the quarter was $700,000, or $0.25 per basic and diluted share. Adjusted EBITDA for the period was $4.8 million.

The single biggest loss for the quarter was the $2.8 million paper loss which we incurred by recognizing an impairment on one older vessel which we had purchased at a relatively high price. Please refer to the press release for the detailed reconciliation of adjusted net loss and adjusted EBITDA. Our CFO Tasos Aslidis, will go over the financial highlights in more detail later on in the presentation. Since the initiation of our repurchase plan of up to $10 million announced in August 2022 and extended twice until August 2025, to date, we have repurchased 334,000 shares of our common stock in the open market for a total of $5.3 million in proceeds. We will continue to execute the share repurchase program around current share price levels.

During this quarter, we successfully completed the refinancing of two of our vessels through a $30 million loan, which further increased our cash reserves by about $11 million. Please turn to slide four for our recent developments. In November 2024, we signed a contract with Nantong Xiangyu Shipbuilding for the construction of two 63,000 DWT Ultramax bulk carriers. Both vessels are geared, eco, of course, and are built to EEDI Phase 3 design standard. The two newbuildings are scheduled to be delivered during the second and third quarters of 2027. The consideration for each vessel is about $36 million and will be financed by a combination of debt and equity. Additionally, we sold Motor Vessel Tasos, the eldest vessel in our fleet, built in 2000, for demolition for approximately $5 million in cash.

Motor Vessel Tasos is a 75,000 DWT Panamax dry bulk vessel and is expected to be delivered to its buyers and an affiliated third party by early March 2025, upon completion of the present charter. The gain on the sale of the vessel is expected to be approximately $2.1 million. On the chartering front, the duration of the majority of our fixtures is short term, ranging between 20-65 days according to their minimum duration, providing us flexibility for future employment. You can see the specifics of the various charters in the accompanying presentation. Throughout the quarter, there were no scheduled drydockings or repairs, allowing us to maintain full operational efficiency. While we experienced no commercial off-hire during the quarter, Motor Vessel Blessed Luck had a seven-day committed commercial off-hire in January 2025. Please turn to slide five.

EuroDry's fleet currently consists of 13 vessels, including five Panamax dry bulk carriers, five Ultramax, two Kamsarmax, and a Supramax dry bulk carrier. Our 13 dry bulk carriers have a total cargo capacity of approximately 920,000 DWT. After the sale of Motor Vessel Tasos, which is expected by early March 2025, EuroDry's fleet will consist of 12 vessels. Not including the Tasos, the average age will drop to 13.6 years from 14.5 years currently. As a reminder, EuroDry owns 61% of the entities that own Motor Vessels Christos and Maria. The remaining 39% is owned by owners represented by NRP Project Finance, otherwise referred to as NRP Investors.

Upon the delivery of the two 63,500 DWT newbuildings, which is set to take place in the second and third quarters of 2027, the company's fleet will increase to 14 dry bulk vessels and with a cargo carrying capacity of just under 1 million DWT. Please turn to slide six for the further update on our fleet employment. Fixed rate coverage for 2025 is approximately 18% through existing charters. This percentage excludes ships on index charters which are open to market fluctuations but have secured employment. Our vessels are chartered under short-term charters until rates rise enough for longer charters to be deemed beneficial. Turning to slide eight, we go over the market highlights for the fourth quarter ended December 31st, 2024, up until recently. In Q4 2024, Panamax vessels experienced a decline in both one-year time charter and spot rates.

The average one-year time charter rate for Panamax vessels stood at $12,700 per day for the quarter, dropping to $11,250 per day by the end of December. Similarly, the average one-year spot rate for Panamaxes during the quarter was $9,250 per day, with a decline to about $7,700 per day on the last day of Q4. Both the Baltic Panamax Index and the Baltic Dry Index saw sharp contractions during the period, dropping by 30% and 28% respectively. However, from year-end 2024 to February 21, 2025, one-year time charter rates for Panamax vessels have rebounded by 12%, and similarly, spot rates have increased by 14% in the same time period. On the Supramax side, we saw less violent drops in Q1.

Currently, spot rates are about $1,000-$2,000 per day higher than Panamax's, but one-year charters are about $500 less than the corresponding Panamax rates. Please turn to slide nine. The IMF's latest update from January 2025 projects stable yet somewhat underwhelming global economic forecasts, showing only a slight improvement to 3.3% of GDP growth from 3.2% predicted in October 2024. This 3.3% GDP growth is also their estimate for 2026. While the U.S. has seen an upward revision with growth now forecast to grow 2.7% in 2025, this stands in stark contrast to other advanced economies, particularly in Europe, which have seen either downgrades or stable growth outlooks at around 1% only.

Adding to this uncertainty, the new U.S. administration's rapid policy changes and reversals, particularly concerning trade policies and geopolitical conflicts, collectively pose risks to the medium-term growth prospects. Global inflation is still expected to decline. However, the near-term trajectory to price stability may still be challenged with persistent services and wages inflation in several parts of the world, leading to desynchronized monetary policy responses. Risks to the global inflation outlook will be tilted to the upside given the prospects of increased protectionism, geopolitical tensions, and demographic constraints. Emerging markets continue to drive global growth, led by India, the ASEAN-5 countries, and China. China's growth appears to be slightly revised upwards, but in the lopsided fashion, with projections of 4.6% this year and 4.5% next year, as the country continues to face tepid domestic demand, persistent deflationary pressures, and falling property markets.

India is projected to maintain steady economic growth of 6.5% in both 2025 and 2026, driven by strong investment activity, robust agricultural performance, and continued expansion in the services sector, which remains a key engine of economic growth. Southeast Asian countries are also positioned for solid growth, benefiting from regional demand and investment momentum. In parallel to global GDP issues, Clarksons' forecasts indicate a more challenging period ahead for the dry bulk trade, with demand growth sharply decelerating from 5% in 2024 to just 0.9% in 2025, followed by stagnant trade levels in 2026. While supply constraints and environmental regulations may offer some rate support, geopolitical risks in the Red Sea persist, and despite the Gaza ceasefire, a swift return to normal shipping operations remains unlikely.

In light of these projections, we remain cautious of the outlook for the dry bulk sector, given key macroeconomic risks and evolving geopolitical tensions, which could impact medium growth prospects. Please turn to slide 10, where we review the current state of the order book in the dry bulk sector. As you can see, as of February 2025, the order book is currently at just 10.5% of the fleet, still standing among the lowest historical levels. Turning to slide 11, let us look into the supply fundamentals in a bit more detail. As of February 2025, the total dry bulk vessel operating fleet was 14,150 vessels.

According to Clarksons' latest report, new deliveries as a percentage of total fleet are expected to be 3.7% in 2025, 3.5% in 2026, and 3% in 2027 onwards. The actual fleet growth is, of course, expected to be lower than the aforementioned figures due to scrapping and slippage. If the 10% of the fleet that is older than 20 years were to be scrapped within the next three years, we would end up with a fleet that has zero growth. Factors such as increased slow steaming, higher scrapping rates, and the tightening of environmental regulations could further constrain the available bulk of fleet, whilst, of course, the reopening of Suez works in the opposite direction. Please turn to slide 12, where we summarize our outlook for the dry bulk market.

As already said, in 2024, the bulk carrier charter market experienced mixed results, with the Capesize segment experiencing gains, while smaller vessel categories such as Ultramax and Kamsarmax faced significant declines. The reopening of the Panama Canal and the easing of port congestion placed additional pressure on the dry bulk market, contributing to a decline in freight rates, some of which reached multi-year lows. The fourth quarter underperformed expectations, with average charter rates for Ultramax and Kamsarmax vessels falling by 25% year-over-year, reflecting the broader market weakness. Looking ahead, the 2025 bulk carrier demand outlook suggests a softer market compared to 2024. A key factor is China's slowing dry bulk imports, which are not expected to match the robust growth seen in 2023 and 2024.

While recent government stimulus measures have supported sentiment, they are unlikely to feed to substantial structural improvements in demand, especially given the persistently high stockpiles. Additionally, U.S. trade policy is emerging as a critical factor for the dry bulk sector under the new Trump administration. Tariffs on China, Mexico, and Canada could disrupt grain and minor bulk trade, particularly if escalating trade tensions lead to retaliatory measures. My initial reaction to the measures Trump announced yesterday regarding Chinese vessel penalties and extra fees when calling the U.S. is that they will not pass, as their main and perhaps only consequence will be to make products imported to the U.S. more expensive to the U.S. consumer. Meanwhile, however, geopolitical risks in the Red Sea remain unresolved.

Despite the Gaza ceasefire, shipping in the region is unlikely to return to normalcy in the near term, and any easing of Red Sea disruptions could further constrain dry bulk demand growth, adding to the challenges facing the market. However, on the supply side, vessel ordering has remained relatively limited, primarily due to shipyard capacity constraints and uncertainty surrounding the fuel of the future amid a growing number of methanol and LNG fuel orders. The order book-to-fleet ratio remains at historically low levels, which could create a backdrop for a potential charter rate recovery if demand strengthens. However, trends differ across vessel classes. While Panamax and Ultramax order books are returned to historical medium levels, the Capesize fleet remains near historical lows but is comparatively younger, meaning fleet renewal pressures may be less immediate.

Furthermore, the new environmental regulations, excluding EEXI, CII, EU ETS, and FuelEU, are expected to further constrain vessel supply through increased scrapping and slower operational speeds. These regulatory measures could help mitigate excess fleet capacity, supporting the market by reducing effective tonnage availability. Let's turn to slide 13. As of February 21, 2025, the one-year time charter rate for Panamax ships with a capacity of 75,000 DWT is at $12,625 per day, slightly higher than a week ago but below the historical median of $13,560 per day. Meanwhile, the market for 10-year-old Panamax bulk carriers remains relatively strong, with current prices at $24.5 million, well above the historical median of $14.8 million and the average of $17.4 million.

However, as of the fourth quarter of 2024, asset values have experienced a notable decline from their mid-2024 peak of $29.5 million, reflecting broader market softening. We are closely monitoring the developments. If the markets drop further and consequently vessel prices also drop, we will be able to acquire one or two more vessels. If the charter market improves, our current fleet will become profitable again. With that, let me pass the floor over to our CFO, Tasos Aslidis, to go over various financial highlights in more detail.

Tasos Aslidis (CFO)

Thank you very much, Aristides. Good morning from me as well, ladies and gentlemen. Over the next four slides, I will give you an overview of our financial highlights for the fourth quarter and full year of 2024 and compare to the same periods of last year. For that, let's turn to slide 15.

For the fourth quarter of 2024, we reported total net revenues of $14.5 million, representing an 8.7% decrease over total net revenues of $15.9 million during the fourth quarter of last year. This was the result of the lower time charter rate our vessels earned in the fourth quarter of this year as compared to the last. Interest and other financing costs for the fourth quarter of 2024, including interest income, remain at about $1.9 million, the same level as in the same period of 2023. Adjusted EBITDA for the fourth quarter of 2024 was $4.8 million compared to $6.6 million achieved during the fourth quarter of last year.

Basic and diluted loss per share, attributable to controlling shareholders, for the fourth quarter of 2024 was $1.20, calculated on about 2.7 million basic and diluted weighted average number of shares outstanding, compared to earnings of $0.13 per share, attributable to controlling shareholders, calculated on approximately 2.7 million basic and 2.8 million diluted weighted average number of shares outstanding in the fourth quarter of last year. Excluding the effect on the loss attributable to the controlling shareholders for the quarter of the unrealized gain on derivatives and the impairment on the vessel, the adjusted loss per share for the quarter ended December 31st, 2024, would have been $0.25 basic and diluted, converted to adjusted earnings per share in the fourth quarter of 2023 of $0.71 and $0.70 per share basic and diluted.

Let's now look at the numbers for the corresponding full years, 2024 and 2023. For the full year of 2024, the company reported total net revenues of $61.1 million, representing a 28.3% increase over total net revenues of $47.6 million during the 12 months of 2023. That was the result of the increased number of vessels operated during 2024 and the slightly higher time charter rates earned by our vessels on average in 2024 compared to 2023. Interest and other financing costs, again including interest income for the 12 months of 2024, amounted to $7.9 million compared to $5.6 million for the same period of 2023. Interest income was about $4.9 million in 2023 versus $4.1 million in 2024.

Interest expense for the period, or year, was higher due to the increased amount of debt during the year as compared to the previous one. Adjusted EBITDA for the 12 months of 2024 was $12.4 million compared to $14.6 million during 2023. Basic and diluted loss per share attributable to controlling shareholders for 2024 was $3.54, calculated on about 2.7 million basic and diluted weighted average number of shares outstanding, compared to basic and diluted loss per share attributable to controlling shareholders for 2023 of $1.05, calculated on about 2.8 million basic and diluted weighted average number of shares for the previous year.

Again, excluding the effect on the net loss attributable to controlling shareholders for the year, the unrealized gain on derivatives and the impairment loss on the vessel, the adjusted loss for the year 2024 would have been $3.02 per share basic and diluted, compared to adjusted earnings per share of about $0.12 basic and diluted for the same period of 2023. Let's now move to slide 16 to review our fleet performance. As usual, we will start our review by looking at fleet utilization rates for the fourth quarter and full year for both 2024 and 2023. Let's first look at 2024's fourth quarter. Our commercial utilization rate during that quarter was 100%, while our operational utilization rate was 99.4%, compared to 100% commercial and 99.5% operational for the same period of 2023.

On average, 13 vessels were owned and operated during the fourth quarter of 2024, earning an average time charter equivalent rate of $12,200 per vessel per day, compared to 12.2 vessels in the same period of the fourth quarter of 2023, earning an average time charter equivalent rate of $14,570 per day. Our total operating expenses, including management fees, general and administrative expenses, but excluding direct costs, were $7,087 per vessel per day during the fourth quarter of 2024, compared to $7,340 per vessel per day during the fourth quarter of last year of 2023. If we move further down on this table, we can see the cash flow break-even rate, which takes also into account direct expenses, interest expenses, and loan repayments.

Thus, in total, for the fourth quarter of 2024, our daily cash flow break-even rate was $11,529 per vessel per day, as compared to $12,263 per vessel per day for the same period of 2023. Let's now look at the right part of the table to review the same figures for the full year. During the full year of 2024, our commercial utilization rate was 99.9%, our operational utilization rate 98.9%, compared to 99.4% commercial and 98.5% operational in 2023.

On average, we owned and operated 13 vessels during 2024, earning an average time charter rate of about $13,039 per vessel per day, compared to 10.6 vessels for the whole of 2023, earning $12,528 per vessel per day. Our total operating expenses for the year, including management fees, G&A expenses, but excluding drydocking costs, averaged $6,967 per vessel per day in 2024, compared to $7,131 per vessel per day in 2023. Again, at the bottom of this table, we can see the cash flow break-even rate for the entire year, which for 2024 amounted to $13,221 per vessel per day, compared to $13,041 for 2023.

The increase being primarily due to the higher drydocking expenses we incurred in 2024 compared to the year before. Let's now turn to slide 17 to review our debt profile. As of December 31st, 2024, our outstanding debt stood at about $108 million. Total repayments for 2025 and 2026 are $12.1 million and $11.3 million, respectively, with a small balloon payment due in 2026 of $2 million and a bigger balloon payment due in 2027 of about $10 million, with an additional approximately $10 million of repayments scheduled to be made in 2027. An important point to highlight in this slide is the average margin of our debt, which as of December 31st, 2024, stood at around 2.08% over SOFR.

Assuming a three-month SOFR rate of 4.31%, the estimated cost of our senior debt is approximately 6.39%, and actually a little lower because we can swap some of our debt for a lower rate, so the effective cost of our senior debt is about 6.3%. At the bottom of this slide, we can see our projected cash flow break-even level for the next 12 months, essentially 2025, broken down into its various components. Overall, we expect to have a lower cash flow break-even level in 2025 of around $11,600 per vessel per day, while our EBITDA break-even level is about $7,526 per vessel per day. We're almost done, and to be done, let's move to slide 18, where we can see, as usual, some highlights from our balance sheet.

This slide offers a snapshot of our assets and liabilities. On our asset side first, our balance sheet is very simple. It includes the book value for our vessels, which as of the end of 2024 amounted to about $185.5 million. We had also advancements made for our newbuildings of $7.2 million, and also had cash and some other assets of about $29.2 million, resulting in a total book value of assets of about $222 million. On liability side, as I mentioned earlier, our debt stood at $108 million, representing about 49% of total book value for our assets.

We had other liabilities and minority interests of about $4.5 million other liabilities and about almost $9 million of minority interests, the share of our partners in those two vessels, resulting in the book value of shareholders' equity of just above $100 million or $35.5 per share. Our estimated market value for our vessels, as of the end of last year, was $222 million, approximately 20% higher than the respective book value, suggesting an NAV per share in excess of $45. Given that our share trades lately between $10 and $11, you can appreciate the potential for appreciation that our stock has, should market conditions or other factors lead to a reduction of this discount. With that, I'd like to pass the floor back to Aristides to continue the call.

Aristides Pittas (Chairman and CEO)

Thank you, Tasos. Let me open up the floor for any questions we may have.

Operator (participant)

Thank you. Now beginning the question and answer session. If you'd like to be placed in the question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to move your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one. One moment, please, while we poll for questions. Our first question today is coming from Tate Sullivan from Maxim Group. Your line is now live.

Tate Sullivan (Managing Director and Senior Research Analyst)

Thank you for my first question, please. For the Q4 impairment of $2.8 million, was that related to Tasos and then reversed in the current quarter?

Tasos Aslidis (CFO)

No, Tasos will record the capital gain. We will record the gain on sale. Aristides mentioned a number around $2 million. That was on another vessel, the Santa Cruz, that was the last one that we bought. One of the last ones that we bought that was bought on a higher point in the cycle, and our tests indicated we should incur impairment.

Tate Sullivan (Managing Director and Senior Research Analyst)

Okay. Thank you. Can you talk about the new build negotiations with any of your organizations? Have you worked with a specific shipyard before, and did their new build price decrease in the last couple of months? How did the price negotiations work?

Aristides Pittas (Chairman and CEO)

We have not built anything at that shipyard in the past, but we did a lot of research and talked to a lot of shipyards before we finally concluded with these guys.

We got a lot of information from other owners that we know that have also ordered ships at those shipyards, maybe the last few years, and have had a good cooperation and are seeing quality results. This obviously played a major impact in us selecting that shipyard. Having said that, it was a tough negotiation, as always, on price and as on the equipment that will be put on board and all that stuff. I feel we got a good price. Today, prices may be slightly softening, but not with deliveries in 2027. We're talking about deliveries in 2028 these days, mostly. I think prices are probably around the same levels that we secured for later delivery.

Tate Sullivan (Managing Director and Senior Research Analyst)

Okay. And then the specs on the new build you mentioned, so eco, I imagine that described means with scrubbers. Did you consider?

Aristides Pittas (Chairman and CEO)

No, eco does not mean with scrubbers. Eco does not mean with scrubbers. It means the most modern electronic engine, practically, and the lower consumption that these ships have relevant even to the previous eco vessels. The vessels are very economic in their fuel consumption.

Tate Sullivan (Managing Director and Senior Research Analyst)

Does that shipyard, or did you consider shipyards with dual LNG engines, or is that not realistic for dry bulk right now?

Aristides Pittas (Chairman and CEO)

No, no. We did look at that, and we did consider that, and it is quite more expensive to provide for LNG, especially the LNG tanks that are needed. We do not think that LNG will be a long-term solution. We want to have the most modern, up-to-date, and economic ships with today's technology.

Tate Sullivan (Managing Director and Senior Research Analyst)

Okay. Thank you very much.

Aristides Pittas (Chairman and CEO)

Thanks.

Operator (participant)

Thank you. As a reminder, that's star one to be placed into question queue. Our next question is coming from Mark Reichman from Noble Capital Markets. Your line is now live.

Mark Reichman (Senior Research Analyst)

On page eight of your presentation, one can see the difference between the spot and the one-year TC rates. At what point would you begin locking in one-year charters, and what might you expect the average to be for the last three quarters of the year?

Aristides Pittas (Chairman and CEO)

Very difficult to make projections about what the average will be for the next three quarters of the year. Extremely difficult. I will not risk it. However, Tasos showed that our break-even levels are around $11,500 per day. If we go up to time charters for the more modern ships of $15,000-$16,000 a day, we might consider it for one or two of our ships. Otherwise, we will probably continue to play the spot market.

The spot market is improving. The traditional lull of the first two months, we've experienced it, and we are hoping that we will see a further improvement in rates within the next two, three months.

Mark Reichman (Senior Research Analyst)

It sounds like you're pretty confident that the spot rates are going to continue their trajectory, that there's more upside than there is downside. In other words, you think it's still beneficial to keep those positions open with the hope that the rates keep going up versus ending up with lower and lower spot rates?

Aristides Pittas (Chairman and CEO)

Correct. Correct. There is downside risk, obviously, but it is not huge. Upside, you never know how high it can go. Balancing risk-reward, we are keeping our ammunition right now and waiting to see how the market develops within the next three months.

Mark Reichman (Senior Research Analyst)

Okay. The second question is really for Tasos, looking at page 17 and your break-evens, but I was just wondering if you might just elaborate a little bit on the vessel expense expectations for 2025 relative to 2024, given that you'll have lower or fewer dry dock days, and also you've got the sale of MV Tasos.

Tasos Aslidis (CFO)

I think the chart I put on slide 17 reflects the removal of the sale of Tasos and the scheduled drydockings. On the OpEx side, we haven't finalized our budgets for 2025, but as a preliminary budget, we are using a 3% increase over the budget of last year. I think the year ended just below last year's budget for the operating expenses, and we are budgeting conservatively 3% over last year's budget. I think all the details of the various components are shown on the bottom part of slide 17.

Mark Reichman (Senior Research Analyst)

Okay. The last question is just, I know it's a ways away, the two vessels that will be delivered in 2027. Just how do you kind of think about financing that? I mean, I know you've talked about debt and equity. Will it be weighted towards debt, or the equity portion, will that be cash generated internally, or just how are you kind of thinking about that currently?

Tasos Aslidis (CFO)

It will definitely be whichever good part of it's financed with debt. I think judging from our previous financings, 55%-60% of that was financed by debt. We might try to get a higher percentage in this case.

The equity portion, we have obviously paid the first installment of 10%, and we have to make another three of such installments before the delivery of the vessels, so another $22 million that we would need to pay to the yard in 2026 and 2027 before the vessels are delivered. We have not really finalized our plans how to finance that. We hopefully will generate that organically, but at the present market, it would be tough, but hopefully the market will improve. Save that, we can look for alternative ways to finance the equity portion.

Mark Reichman (Senior Research Analyst)

That's great. Thank you very much.

Tasos Aslidis (CFO)

Thank you, Mark. Thanks for the interest.

Operator (participant)

Thank you. As a reminder, star one to be placed into question queue. Our next question is coming from Poe Fratt from Alliance Global Partners. Your line is now live.

Poe Fratt (Managing Director of Equity Research and Senior Transportation Analyst)

Hi. Hello Aristides, hello, Tasos. Can you just.

Aristides Pittas (Chairman and CEO)

Hi.

Poe Fratt (Managing Director of Equity Research and Senior Transportation Analyst)

Tasos, can you just go over the new build payments? It sounds like you're not going to have any new build payments in 2025. Can you quantify how much of the new build costs will land in 2026 and then 2027?

Tasos Aslidis (CFO)

I think in 2026, we will have to pay $14.4 million, two times 10% per vessel, and another 10%, that is another $7.2 million in 2027 as a pre-delivery payment. Finally, the final 60%, I guess, will be paid with the delivery of the vessels. I think Aristides mentioned the second and the third quarter of 2027.

Poe Fratt (Managing Director of Equity Research and Senior Transportation Analyst)

Great. That's really helpful. Just to clarify, it doesn't make sense to put scrubbers on new builds at this point in time, correct?

Aristides Pittas (Chairman and CEO)

This is not something which is certain, but some owners are putting on scrubbers on the smaller vessels. Some are not. Whilst I think that the verdict is out there for the very big vessels that have high consumptions, that you should put a scrubber on. For Ultramax vessels that consume so little, I'm not sure that it is worth it. I also have some reservations against the whole concept of scrubbers and how much they are, and if at all they are polluting the sea, but we are not putting them on.

It also depends, of course, on how the price differential between heavy fuel oil and the low sulfur fuel oil develops. Right now, it is quite low, so there is no huge advantage of having a scrubber. It might become even lower, so there is definitely no advantage of having a scrubber. It might pick up again, and you might recover the reinvestment of the scrubber in a small period of time. It's a different kind of investment, really.

Poe Fratt (Managing Director of Equity Research and Senior Transportation Analyst)

Understood. Aristides, I think you mentioned that if asset values soften, you potentially might look at making acquisitions. How much can you give us an idea of sort of the current activity in the S&P market? Are you seeing a lot more potential transactions? Are asset values close to where you might pull the trigger on acquisitions? Can you just give us a flavor for your current assessment of the S&P market?

Aristides Pittas (Chairman and CEO)

I can tell you that prices have been dropping ever since October, November last year. Until the beginning of February, they had corrected, I would say, on the 10 year-old ships that we traditionally are looking at. They had dropped by about 15%. We thought that if they were to drop by about 30% from those highs, they could become an interesting proposition.

A couple of deals were done last two weeks. In fact, we bid on one of those ships, but the prices, rather than continuing, they're softening, were elevated for these vessels, so they rose a little bit again. Now, with the charter market improving, I don't think that we will see imminently lower prices. We would like to see prices drop by another 15% to consider buying something. I think I couldn't have been more clear.

Poe Fratt (Managing Director of Equity Research and Senior Transportation Analyst)

That's great. Sorry, Tasos.

Tasos Aslidis (CFO)

We're always on the look for interesting transactions. My group keeps busy evaluating deals all the time, although they don't pass the threshold yet.

Poe Fratt (Managing Director of Equity Research and Senior Transportation Analyst)

Tasos, how current is that NAV that you talked about in the mid-forties? Does that fully incorporate the 15% drop in asset values, or is that 15% sort of a lagging—oh, I'm sorry, is that $45 sort of a lagging? Is there a lag between which you see the softness hit the NAV?

Tasos Aslidis (CFO)

It's already—I mean, if I recall on the top of my head, our previous end September valuation was around $250 million, if I'm not mistaken. So by the year end, the market had dropped by essentially 15%. Maybe by the middle of January, late January, it might have dropped a little bit more, but it sounds like it has rebounded a bit more recently. I mean, it's on the ballpark. To be more accurate, it's for the end of the year, the number I quoted you in the presentation, but if we were to recalculate it pro forma to today's values, it should be not far from it.

Poe Fratt (Managing Director of Equity Research and Senior Transportation Analyst)

Okay. I know, Aristides, you're hesitant to put out your crystal ball on what the rest of the year is going to look like from a TC standpoint, but can you—many other companies talk about what they've booked in the quarter so far, a percentage that's already booked for the quarter and a rate that's associated with those bookings. Do you have a similar metric available for us? Where do we stand at this point in the quarter as far as the first quarter?

Aristides Pittas (Chairman and CEO)

I think Tasos can tell you after the call where we are based on our existing charters, because now we're at the end of February. Obviously, I would think 80% of what we're going to make is already booked. We have an idea about it, but I don't have it offhand.

Tasos Aslidis (CFO)

I'm so glad to get a flavor of the charters we concluded recently, and they really cover the quarter to date pretty much. I think on average, I ball them to be below $10,000, the average.

Poe Fratt (Managing Director of Equity Research and Senior Transportation Analyst)

Okay. That's great. Improving, firming up, and the second quarter potentially would look a little bit better than the first quarter.

Tasos Aslidis (CFO)

Hopefully, March would be a little better. The quarter roll over in March would be better. I would dare to say more certainly, Q2 will be a little better because it's also a seasonally better quarter.

Aristides Pittas (Chairman and CEO)

But also already, I mean, the last fixer we did, I think, was the Yannis Pittas, which was fixed for $12,000, which is higher than the levels we were seeing even one month ago.

Poe Fratt (Managing Director of Equity Research and Senior Transportation Analyst)

Great. Really helpful. Thank you.

Aristides Pittas (Chairman and CEO)

Thanks, guys.

Tasos Aslidis (CFO)

Thank you.

Operator (participant)

Thank you. We reached the end of our question and answer session. I'd like to turn the floor back over for any further or closing comments.

Aristides Pittas (Chairman and CEO)

Thank you all for listening in today. We'll be back to you at the beginning of—what is it?

Tasos Aslidis (CFO)

Middle of May.

Aristides Pittas (Chairman and CEO)

Middle of May.

Tasos Aslidis (CFO)

The latter part of May.

Aristides Pittas (Chairman and CEO)

Yes. With the Q1 results.

Tasos Aslidis (CFO)

And hopefully, we'll be better if the market helps us.

Aristides Pittas (Chairman and CEO)

Exactly.

Tasos Aslidis (CFO)

Thanks all again.

Aristides Pittas (Chairman and CEO)

Thank you, guys.

Operator (participant)

Thank you, Aristides. Tell our conference meetings to collect your line at this time, and have a wonderful day. We thank you for your participation today.